2012 (10) TMI 826 - AT - Service Tax

In-eligible CENVAT Credit of the Service Tax paid on courier/telephone services - the appellant having accepted that they are not eligible for availing CENVAT Credit, the interest liability arises and they are liable to pay interest on the CENVAT Credit availed. Regarding penalty - held that - the appellant has reversed the CENVAT Credit which has been pointed out as erroneously taken in August and September 2008 itself. It is also to be noted that the credit which has been availed on courier/telephone/security services, if would have been contested on merit they may have succeeded, as these services are eligible for availing CENVAT credit of Service Tax paid. - penalty set aside.

Summary

Issues:
1. Stay petition for waiver of pre-deposit of CENVAT Credit, interest, and penalty.
2. Contesting interest and penalty only.
3. Eligibility of CENVAT Credit on various services.
4. Confirmation of demand.
5. Interest liability on CENVAT Credit.
6. Penalty imposed under Rule 15 of CENVAT Credit Rules, 2004.

Analysis:
1. The appellant filed a Stay Petition seeking waiver of pre-deposit of CENVAT Credit, interest, and penalty. The appellant had already reversed the CENVAT Credit but contested interest and penalty only.

2. The authorized representatives of the company clarified that they were not contesting the reversal of CENVAT Credit but were disputing the interest and penalty aspects. The appeal was considered for disposal after allowing the Stay Petition for waiver of pre-deposit of interest and penalty.

3. The issue revolved around the eligibility of CENVAT Credit on services like courier, telephone, and security services. The appellant acknowledged an ineligible CENVAT Credit availed on invoices not in their name, leading to a demand of Rs.6,80,67/-.

4. The appeal was rejected concerning the reversal of CENVAT Credit, upholding the lower authorities' order for the confirmation of the demand amount.

5. Regarding the interest demand, the appellant accepted their ineligibility for the CENVAT Credit, resulting in an interest liability of Rs.53,913/-, which they were directed to deposit within thirty days.

6. The penalty was imposed under Rule 15 of CENVAT Credit Rules, 2004, along with Section 11AC of the Central Excise Act, 1944. However, considering the circumstances where the appellant had rectified the error promptly and was willing to discharge the interest liability, the equivalent penalty was deemed unwarranted and set aside.

7. The appellant's appeal against the penalty was allowed, and the impugned order imposing the penalty was set aside, providing a comprehensive resolution to the issues raised in the case.